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Basis of Presentation, Going Concern and Summary of Significant Accounting Policies (Policy)
 9 Months Ended
Sep. 30, 2013
Basis of Presentation, Going Concern and Summary of Significant Accounting Policies [Abstract]  
Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim information and with the instructions to Form 10-Q and Regulation S-K. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments consisting of a normal and recurring nature considered necessary for a fair presentation have been included. Operating results for the three and nine - month periods ended September 30, 2013 may not necessarily be indicative of the results that may be expected for the year ending December 31, 2013.

For further information, refer to Puradyn Filter Technologies Incorporated's (the "Company") consolidated financial statements and footnotes thereto included in the Form 10-K for the year ended December 31, 2012.


Since its formation June 1, 2000, Puradyn Filter Technologies, Ltd. ("Ltd."), the Company's United Kingdom subsidiary, has been included in the Company's condensed consolidated financial statements. In March, 2009, Ltd.'s office in the UK was closed and all assets, except for bank cash accounts, were transferred to the United States. Effective January, 2012, Ltd., ceased as a legal entity.
Use of Estimates

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Significant estimates in the accompanying unaudited condensed consolidated financial statements include the allowance for doubtful accounts receivable, valuation of inventory, future warranty claims, valuation of share based payments, and the valuation of intangible assets including patents.
Basic and Diluted Loss Per Share

Basic and Diluted Loss Per Share

FASB ASC 260, Earnings Per Share, requires a dual presentation of basic and diluted earnings per share. However, because of the Company's net losses, the effect of outstanding stock options and warrants would be anti-dilutive and, accordingly, is excluded from the computation of diluted loss per share. The number of such shares excluded from the computation of loss per share totaled 6,539,788 and 7,763,730 for the three months and nine months ended September 30, 2013 and 2012, respectively.
Stock Compensation

Stock Compensation

The Company adopted FASB ASC 718, Compensation - Stock Compensation, effective January 1, 2006 using the modified prospective application method of adoption which requires us to record compensation cost related to unvested stock awards as of December 31, 2005, recognizing the amortized grant date fair value in accordance with provisions of FASB ASC 718 on straight line basis over the service periods of each award.  We have estimated forfeiture rates based on our historical experience.  Stock option compensation expense for the periods ended September 30, 2013 and September 30, 2012 have been recognized as a component of cost of goods sold and general and administrative expenses in the accompanying Condensed Consolidated Financial Statements.

Stock options and warrants issued to consultants and other non-employees as compensation for services provided to the Company are accounted for based on the fair value of the services provided or the estimated fair market value of the option or warrant, whichever is more reliably measurable in accordance with FASB ASC 718 and FASB ASC 505 Equity, including related amendments and interpretations. The related expense is recognized over the period the services are provided.
Inventories

Inventories


Inventories are stated at the lower of cost or market using the first in, first out (FIFO) method. Production costs, consisting of labor and overhead, are applied to ending inventories at a rate based on estimated production capacity and any excess production costs are charged to cost of products sold. Provisions have been made to reduce excess or obsolete inventories to their net realizable value.


Inventories consisted of the following at September 30, 2013 and December 31, 2012, respectively:

               

 

 

September 30,

2013

 

December 31,

2012

 

 

 

(unaudited)

 

 

 

Raw materials

 

$

949,109

 

$

981,458

 

Work In Progress

 

 

5,096

 

 

409

 

Finished goods

 

 

114,232

 

 

132,122

 

Valuation allowance

 

 

(438,896

)

 

(396,194

)

Inventory, net

 

$

629,541

 

$

717,795

 


During the nine months ended September 30, 2013 the Company recorded an additional reserve for slow moving inventory of $42,702.
Deferred Financing Costs

Deferred Financing Costs

The Company capitalizes financing costs and amortizes them using the straight-line method, which approximates the effective interest method, over the term of the related debt. Amortization of deferred financing costs is included in interest expense and totaled $63 and $189 for the three and nine months ended September 30 2013 compared to $189 and $596 for the three and nine months ended September 30, 2013 and 2012, respectively.  Accumulated amortization of deferred financing costs as of September 30, 2013 and 2012 was $680,835 and $680,521, respectively. Net deferred financing costs as of September 30, 2013 and December 31, 2012 were $314 and $503, respectively.
Revenue Recognition

Revenue Recognition


The Company recognizes revenue from product sales to customers, distributors and resellers when products that do not require further services or installation by the Company are shipped, when there are no uncertainties surrounding customer acceptance and when collectability is reasonably assured in accordance with FASB ASC 605, Revenue Recognition, as amended and interpreted. Cash received by the Company prior to shipment is recorded as deferred revenue. Sales are made to customers under terms allowing certain limited rights of return and other limited product and performance warranties for which provision has been made in the accompanying condensed consolidated financial statements.


Amounts billed to customers in sales transactions related to shipping and handling, represent revenues earned for the goods provided and are included in net sales. Costs of shipping and handling are included in cost of products sold.
Product Warranty Costs

Product Warranty Costs

As required by FASB ASC 460, Guarantor's Guarantees, the Company is including the following disclosure applicable to its product warranties.

The Company accrues for warranty costs based on the expected material and labor costs to provide warranty replacement products. The methodology used in determining the liability for warranty cost is based upon historical information and experience.  The Company's warranty reserve is included in accrued liabilities in the accompanying condensed consolidated financial statements and is calculated as the gross sales multiplied by the historical warranty expense return rate. During the three months ended September 30, 2013 the Company incurred warranty claims amounting to $6,094 for units that were replaced at the customer's request.  Management has evaluated the remaining warranty reserve and deemed it to be sufficient to cover future claims based on historical sales levels and known units in the field that are still within the Company's warranty period.


The following table shows the changes in the aggregate product warranty liability for the nine-months ended September 30, 2013:


         

Balance as of December 31, 2012

     

$

20,000

 

Less: Payments made

 

 

(6,094

)

Add:  Provision for current period warranties

 

 

6,094

 

Balance as of September 30, 2013 (unaudited)

 

$

20,000

 
Comprehensive Income

Comprehensive Income


FASB ASC 220, Comprehensive Income establishes rules for reporting and displaying of comprehensive income and its components. Comprehensive income is the sum of net loss as reported in the condensed consolidated statements of operations and other comprehensive income transactions. Other comprehensive income transactions that currently apply to the Company result from changes in exchange rates used in translating the financial statements of its wholly owned subsidiary, Puradyn Filter Technologies, Ltd. ("Ltd."). Comprehensive loss as of September 30, 2013 and 2012 is not shown net of taxes because the Company's deferred tax asset has been fully offset by a valuation allowance. There was no comprehensive income or loss attributable to the nine months ended September 30, 2013 as Ltd.'s business license was surrendered with the British authorities in January, 2012.
New Accounting Pronouncements

New Accounting Pronouncements


During the three months ended September 30, 2013 there were no new accounting pronouncements that were deemed to have a material impact on the Company's financial results.